Should I Use an e-Business Broker When I Buy a Website?
A website broker is similar to a real estate broker to the extent that they try to put buyers and sellers together. Instead of real estate being sold, they focus on websites. The criteria to become a website broker vary from state to state and their individual training, history, specialty and area of expertise are things that you must investigate. Some website brokers work independently while others work for a website brokerage company. Website Brokers work on commission and if you do not ultimately buy a business then any work that they have done for you is not compensated.
If you hire a website broker, it is critical that you hire the right one. A website Broker may be able to provide you with access to websites that are available for sale that you would never be able to find on your own. They can narrow the search for you to websites that fit your criteria and they can help you avoid a lot of wasted time. The one thing that brokers cannot do is to find a website that is right for you. This is something that only you can do. Brokers clearly prefer to work with knowledgeable buyers and if they have to spend their time educating you then they cannot make money. They can be an effective tool for you to use if you can provide them with a clear mandate of what it is that you are looking to buy. Avoid generalities; explain your strengths, weaknesses and objectives and never mislead them.
Ninety percent of the potential buyers that brokers work with never buy a business. While this is part of the risk involved in their chosen profession, this does not give you the right to waste their time. Accordingly, they may be somewhat hesitant when working with new clients until you demonstrate your sincerity and commitment to buying a website. There is no doubt that if you are a serious and educated buyer then a good broker will go above and beyond the call of duty to service your needs. Be respectful of their time and realize that they have to make a living. If at any time you decide to drop out of the hunt to buy a website then let them know immediately. Conversely, if you do not feel that they are extending their best efforts on your behalf then find another one.
There are two significant ways that a website broker can help you. First, they can provide you with listings and information on websites that are available for sale that you might not discover on your own. Secondly, they can assume the role of the "bad guy". Once you get into negotiations with a seller you should let the broker deliver any bad news or commentary that you may have. The reason for this is because you are going to need the seller's help in completing the deal and thereafter for training and assistance. By letting the broker deal with the bad news you can maintain the integrity of your relationship and keep yourself in a third party position somewhat if renegotiations are needed.
If you use the wrong website broker they can hurt you significantly. They will be a monumental waste of your time. They can send you looking in the wrong direction altogether. They can try to work both parties against each other for their own benefit and they may not make you privy to everything that they are discussing with the website owner. It is not possible for a website broker to represent both the buyer and the seller. Their agenda will certainly be hidden and they will be in a conflict of interest position. This is specifically why you must control the negotiations and use them properly or you may find yourself terribly frustrated.
When you call a potential broker, if they do not return your call within 24 hours forget about them as a candidate. When you do speak with them, let them know as much as possible about your goals, experience, wants and needs. Get the names of buyers and sellers that they have worked for in the past. Once they give you the list of 4-5 of each, ask them for a couple more. The reason you want to do this is because they will naturally give you the names of people that they believe are pleased with them so try to get some additional ones. Contact each one of these and ask them if they could tell you what they believe the broker's strengths and weaknesses are. Be sure to ask each one if they were going to buy or sell a website in the future would they use them again. Tell them the approximate price website you are looking for and ask if they feel that the broker is well suited for your needs. Ask them what it is specifically that the broker did well or poorly for them.
Some brokers may try to get you to sign exclusive representation agreements with them. Under no circumstances whatsoever are you to do this! Make it very clear that you will be pleased to work with them and that the best measure that they can take to ensure that they earn a commission from you is to lead you to the right business. Some brokers may request an application fee. If you believe that the broker is right for you then you can consider it if it's a small amount. They must put in writing that if they do not perform their duties then the money will be refunded, no questions asked and when you buy a business if they are involved in the transaction then they must also refund the money. They will ask you to sign Confidentiality Agreements for any confidential information they show you.
The seller is responsible to pay the website brokers commission from the proceeds of the sale. Ask the website broker to send you a copy of the agreements that they have in place with sellers so you understand the terms and conditions of their agreements and to see if you have any exposure whatsoever. Generally, the commission is 10% of the total deal regardless of the terms of the agreement and this amount is split between all of the brokers involved. Furthermore, if they work for a brokerage company, part of their share goes to the company. So, when all is said and done, they don't make as much as you think so don't feel that they are making money at your expense. Good brokers earn their money; bad ones should not be allowed to handle your business.
If you do not feel that the website broker is working out well then look for another one. Remember, they are entitled to receive a commission for any businesses that they may have shown you, so when you hire a new one give them all of these details and have them document how the broker's commission will be split in the event that you buy a website that your previous website broker introduced to you.
Even though your broker may earn a large commission from the website you buy, they are always at risk of earning zero if you don't buy. Never begrudge their commission; if they do their job, they are entitled to it. It's good for you to express your appreciation for them doing work on your behalf not knowing if it will evolve into any compensation. It really is the right thing to do!